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Deduction Amount Claimed Amount Allowed Amount Disallowed
Depreciation $4,157 --- $4,157
Legal/Professional 3,270 --- 3,270
Other/Used file cabinets,
chairs, and tables 7,840 --- 7,840
Trade mission 6,975 --- 6,975
Overseas rent 3,900 --- 3,900
Overseas expenses 7,870 --- 7,870
Overseas wages 16,000 --- 16,000
Overseas office 1,680 --- 1,680
For 1999 and 2000, respondent also changed petitioner’s
filing status from head of household to single and disallowed the
earned income credit. For 2000, respondent determined that
petitioner received, but failed to report, proceeds of $42 from
the sale of stock. Finally, respondent determined that
petitioner is liable for the accuracy-related penalty under
section 6662(a) for 1999 and 2000.
II. Discussion
A. Burden of Proof
Historically, and as a general rule, the Commissioner’s
determinations are presumed correct, and the taxpayer bears the
burden of proving that those determinations are erroneous. Rule
142(a). This principle was established by the United States
Supreme Court as early as 1933 and was reaffirmed by the Supreme
Court as recently as 1992. See INDOPCO, Inc. v. Commissioner,
503 U.S. 79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115
(1933).
However, the foregoing rule is subject to the provisions of
section 7491, which was enacted as part of the Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
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